Sony Ericsson's future in doubt

Sony Ericsson's future in doubt

According to reports, mobile equipment manufacturer Ericsson has warned that it may not continue funding its mobile phone joint venture with Sony.
Kurt Hellstroem, the chief executive of Ericsson, told the Wall Street Journal that unless the joint venture with Sony, called Sony Ericsson Mobile Communications, showed better results over the next few quarters, Ericsson may cut off funding. Ericsson currently expects to invest as much as EUR500 million in the company over the next twelve months, but the completion of the investment will depend on Sony Ericsson's performance.

Other subsequent reports have quoted Sony spokespeople who say the Japanese partner will continue to support the venture and that the company has not received any notification from Ericsson that it planned to withdraw support.

The joint venture was designed to marry the expertise of Ericsson with that of Sony, to produce highly specified and fashionable phones. On a technical level the company has been successful, producing phones such as the P800 Smartphone, which competes with Nokia's MMS-enabled 7650 camera-phone. The P800 also has GPRS connectivity, tri-band GSM functionality and Bluetooth wireless functionality.

But while Motorola, Samsung, Nokia and Siemens have benefited from a recovery in the mobile phone handset business, Sony Ericsson has seen its unit shipments dive by almost 30 percent as its market share slipped from 7.7 percent to 5.3 percent, shipping only 5.4 million phones in the second quarter of 2002, according to the most recent Dataquest figures.

Meanwhile, Ericsson, which is raising EUR3.2 billion in a share sale to stay afloat, has been cutting spending and eliminating jobs amid two straight annual losses. The Stockholm-based company plans to cut its workforce to below 60,000 by the end of 2003 and has also announced more recently that it plans to outsource 4,000 information technology jobs.

Ericsson reported net losses of EUR377 million for it second quarter, an improvement on its EUR582 million in the first quarter.

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